Five9 Inc: Tech Stock Not Fazed By Tech Cold War Could Climb 50%

Five9 Inc: Record Results With 50% Upside Potential in 2019
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Five9 Inc: Record Q1 Results, Raises Full-Year Guidance

The technology sector has been taking a beating since the start of May as the threat of a prolonged trade war and between the U.S. and China, the world’s two largest economies, rattles the market. More specifically, a tech cold war between the two superpowers has already begun, taking the wind out of Silicon Valley.

There are some U.S. tech stocks, though, that will avoid the tech cold war. And Five9 Inc (NASDAQ:FIVN) is one of them.

Despite the exodus from tech stock, FIVN stock is up 50% over the last year and 17.2% year-to-date. The business has also reported record first-quarter revenue growth and improved margins, and it has raised its full-year guidance.

Currently trading at $50.10, Five9 Inc has, according to Wall Street analysts, a median target for the next 12 months of $60.00 per share, with a high estimate of $65.00. This represents a median increase of approximately 20% from current levels, with high-estimate gains of 30%.

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For the most part, Wall Street analysts don’t like to take risks when it comes to projections. As a result, that “high” estimate of $65.00 is probably a little too conservative.

Five9 Inc Overview

A provider of cloud contact center software, Five9 also provides management applications such as workforce management, quality management, reporting, and supervision tools.

Some of the San Ramon, California-based company’s customers include Blue Cross Blue Shield Association, Citrix Systems, Inc. (NASDAQ:CTXS), Expedia Group Inc (NASDAQ:EXPE), and Fitbit Inc (NYSE:FIT). (Source: “Overview,” Five9 Inc, last accessed May 24, 2019.)

FIVN Stock Information
Market Cap $3.0 Billion
Beta 0.86
52-Week Change 50%
52-Week High $57.90
52-Week Low $31.64
Shares Outstanding 59.7 Million
Float 58.4 Million
50-Day Moving Average $50.59
200-Day Moving Average $48.14

(Source: “Five9, Inc. (FIVN),” Yahoo! Finance, last accessed May 24, 2019.)

Five9 Inc stock began trading on the Nasdaq back in April 2014 and it has been bullish since 2016, soaring 485%. Over the last 52 weeks, its share price has far outpaced the S&P 500, which is up just 3.5%.

Year-to-date, FIVN stock has advanced 17%.

Chart courtesy of StockCharts.com

Record First-Quarter Revenue Growth

On May 1, Five9 Inc announced its financial results for the first quarter, ended March 31, 2019.

First-quarter revenue increased 27% year-over-year to a record $74.5 million. The company reported a first-quarter net loss of $1.9 million ($0.03 per share), versus a net loss of $0.6 million ($0.01 per share) in the same prior-year period. (Source: “Five9 Reports First Quarter Revenue Growth of 27% To A Record $74.5 Million,” Five9 Inc, May 1, 2019.)

Non-generally accepted accounting principles (GAAP) net income came in at $10.0 million ($0.16 per share), a 122% increase over the non-GAAP net income of $4.5 million ($0.08 per share) in the first quarter of 2018.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for first-quarter 2019 was $11.8 million, or 15.9% of total revenue. First-quarter 2018 adjusted EBITDA was $7.5 million, or 12.7% of revenue.

The business also reported operating cash flow of $11.2 million, compared to $8.0 million for the first quarter of 2018. This is the 13th consecutive quarter that Five9 has reported positive operating cash.

The company ended the first quarter with cash and cash equivalents of $93.5 million.

Business Outlook

For the second quarter, Five9 expects to report revenue in the range of $72.0 to $73.0 million. At the mid-point, that would be an 18% increase over the record $61.1 million recorded in the second quarter of 2018.

The company also expects to report non-GAAP net income in the range of $7.0 to $8.0 million ($0.11 to $0.13 per share). In the second quarter of 2018, the company reported non-GAAP net income of $6.9 million, or $0.11 per share. (Source: Ibid.)

For fiscal 2019, Five9 expects to report revenue in the range of $304.0 to $307.0 million, up from the prior guidance range of $298.5 to $301.5 million. In 2018, the company reported record revenue of $257.7 million.

The company expects to report non-GAAP net income in the range of $39.3 to $42.3 million ($0.61 to $0.66 per diluted share), improved from the prior guidance range of $36.8 to $39.8 million ($0.58 to $0.62 per diluted share). In 2018, Five9 Inc reported non-GAAP net income of $37.0 million ($0.60 per diluted share).

Analyst Take

Five9 Inc is a financially robust company that continues to dominate the markets it serves. It reported record first-year revenue and strong non-GAAP net income and adjusted EBITDA growth, continuing its long history of reporting record results.

The company expects its winning ways to continue. Continued strong market penetration should help it continue to report record revenue growth and improved margins. This should help juice Five9 stock and reward long-term investors.